How To Plan A Budget When Poor

When things aren't going your way, it can be useful to know how to plan a budget when poor. Years ago, John Ritter starred as a loving adoptive father in the movie "Problem Child." There was one memorable scene in that highly forgettable movie: John handed his newly adopted son a dollar. "I'm giving you an allowance," he gushed, "so you can learn to manage money." The kid stared at the dollar for a minute, and then muttered, "How do you manage a buck?" If you're trying to figure out how to plan a budget when poor, you might be asking yourself the same question. Here's what you do:

1. Know where your money is going. When you're poor, it's easy to fall into "learned helplessness" patterns of behavior—you believe you can't improve things so you don't even try, and you just keep going deeper. It's painful and discouraging to know how far in debt you are and how little you bring in, but suck it up and write down the numbers. Look online, make the calls, find the papers and make a list of what you bring in, where the money is going, and how much you owe. 
2. Make a plan. Now that you know how much is coming in and going out every month, it's time to draw up a budget. Divide your expenses up into basic categories and add them up. Since you're reading about how to plan a budget when poor, chances are that  your first total is going to be more than your income amount. Some of these amounts are fixed, and some can be pared down. When planning a budget, try to adjust the amounts so they fit within the income. If you can't get your budget to balance, or if the numbers seems too unrealistic, you might be tempted to abandon the whole thing and go back to mindless spending. Don't! Keep reading, because there are things you can do to get that deficit turned around.
3. Plug the leaks. The first and easiest thing to fix is the wasted money. These include things like overdue fines and overdraft fees. The second and a bit harder part of this is the leaks that do give you a temporary pleasure and payoff—fast food, alcohol, the large-sized popcorn at the movie theater, and purchases with credit cards. These are expenditures that you "deserve" because you work hard or have a hard life or whatever, but which actually cost you far more than the minute's pleasure that they offer. It's not that you can't have these things anymore, but you can't have all of them, and if you do have them, you'd better make them count.
4. Start paring the numbers down. Become an expert on cutting back. Be willing to do whatever it takes. Make your own laundry soap, sell the financed car and buy a junker, get help with your groceries from food banks. Keep at it until your budget is balanced.
5. Boost your income. Do whatever you can to get that income number larger than the expense number. Babysit overnight, sell used clothes and toys online, have a garage sale, mow lawns on the weekend. Use the money to meet your expenses (not treat yourself to a little luxury). If your expense are met, use the money to reduce your debt. If your debt is all paid off (a beautiful thing!) then sock the money away for an emergency. Because while you don't know what the emergency will be, you can be sure that there will be an emergency. And if you're ready then it won't be a crisis.

These days it seems like everyone has everything—the big SUVs, flat-screen TVs with 500 channels and the newest clothes, shoes and jewelry. It's easy to feel deprived if you don't get these things for yourself. But if you're poor but living within your means, you will actually be better off than most of the people who have those things (and couldn't afford them). The one thing you can't buy on credit is peace of mind.

Resources:

Federal Trade Commission